Assessing the White House Infrastructure Plan

Posted on February 21, 2018 by matt ohern
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Well before the plan’s February 12th release, many seemed to have made up their minds that it was a scam or a delusion. Many Democrats in Congress have called for $1 trillion of new federal spending, without a thought about where that enormous sum would come from. Others were outraged that one of the programs in the bill would provide only 20% funding, with the rest having to come from state, local, and/or private sources. Another criticism was the plan’s approach to funding the planned $200 billion federal expenditures over 10 years: not by either raising tax rates or further borrowing but by eliminating ineffective federal programs.
Let’s take the last point first. The FY 2018 budget for federal discretionary spending (excluding entitlements) is $1.2 trillion. $200 billion over a decade averages $20 billion per year. That is 1.67% of the annual budget that includes national defense and all domestic programs other than entitlements. It’s absurd to imagine that somewhere in that $1.2 trillion there are not some items that are outdated, or have been shown to be ineffective, or are inherently state or local in nature, not federal. It’s a basic principle of good government to periodically review all the things it is doing, assess the benefits versus cost of each, and weed out those that are not delivering value for money. The White House should be commended for proposing this, not condemned.
Secondly, some politicians and popular media have portrayed the Incentives Initiative as if it were reversing the historic 80/20 federal/state funding split. But as White House infrastructure maven D. J. Gribbin has explained, all the existing transportation formula programs are unchanged. The Incentives Initiative is in addition to those long-standing programs, and it’s intended to draw on innovative financing in an effort to leverage the federal dollars. And to make good on that premise, the White House plan would significantly expand the federal programs that assist such leveraging: private activity bonds, TIFIA, RRIF, and WIFIA.
The White House’s more nuanced approach is not intended as a massive “stimulus” program, which is not what America needs. What we do need is much better targeting of investment to infrastructure projects that deliver better value for money. Both the Incentives Initiative and the Transformative Projects Program are aimed at this kind of project. And the former, in particular, is aimed at expanding the use of long-term public-private partnerships (P3s), for which hundreds of billions in private equity capital is interested and available. This money resides in for-profit infrastructure investment funds and in nonprofit public employee pension funds. Both are already investing in P3 infrastructure in Europe, Latin America, and the Asia/Pacific region, but very little here in the land of free enterprise. What they lack is a “pipeline of P3 projects.” To the extent that states are unwilling to provide 80% of the funding for major infrastructure improvements, they will be motivated to offer such projects as long-term P3s—as pioneer states such as Colorado, Florida, Indiana, Texas, and Virginia have been doing.
The White House plan also includes policy changes that will make it easier for projects to be offered as revenue-risk P3s. This includes making tax-exempt private activity bonds more widely available for such projects, removing the outdated federal ban on toll-financing the reconstruction and modernization of aging Interstate highways, and potentially allowing such revenue-based P3 projects to replace and modernize the aging locks and dams on the Inland Waterway System.
That plus meaningful streamlining of the permitting process should open the door for significant new investment in American infrastructure.
(This article is reprinted from the February issue of Surface Transportation Innovations)
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Supreme Court whacks EPA on Waters rule

Posted on February 21, 2018 by matt ohern
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According to the U.S. Supreme Court, “Our constitutional structure does not permit this [U.S. Supreme] Court to rewrite the statute that Congress has enacted.” Furthermore, “The Court declines the Government’s invitation to override Congress’ considered choice by rewriting the words of the statute.”
Justice Sonia Sotomayor continues to hammer EPA by saying, “Unable to anchor its preferred reading in the statutory text, the Government seeks refuge in a litany of extratextual considerations that it believes support direct circuit-court review of the WOTUS (Waters of the United States) rule.”
These stinging rebukes were aimed at EPA and the U.S. Army Corps of Engineers (Corps) for their effort to create one of the largest grabs of authority over private property under the Clean Water Act (CWA). The U.S. Supreme Court on January 22, 2018, issued an opinion on a narrow legal interpretation as to whether review of the WOTUS rule would be under jurisdiction of a U.S. district court or, as EPA argued, under the jurisdiction of a United States Court of Appeals.
Using arguments only lawyers would love, Justice Sotomayor eviscerates EPA’s arguments that the WOTUS rule should be reviewed by an appeals court.
Seven categories for EPA action.
The CWA sets forth seven categories for EPA action where review is directly and exclusively under the jurisdiction of federal courts of appeals. EPA contended that its WOTUS rule should be reviewed as approving or promulgating an effluent limitation or other limitation under various sections of the CWA. EPA argued, and with apparent support from the Trump Administration lawyers, that the WOTUS rule would fit as an “other” limitation.
EPA’s other argument was the WOTUS rule was similar to “…issuing or denying any permit” under the CWA. The Supreme Court disagreed with EPA’s grab for power and said simply “We disagree” with your attempting to rewrite the CWA.
EPA contended that in issuing the WOTUS rule, the rule “readily qualifies as an action promulgating or approving an ‘other limitation’ under section 1311” of the CWA. Justice Sotomayor and the Court said simply, “We disagree.” The Supreme Court says with some incredulity that the WOTUS rule is not an effluent limitation and points out the government really doesn’t disagree. An effluent limitation under the CWA is a restriction on what may be discharged into water. The WOTUS rule imposes no such restriction. The Court, in amazement, said, “The rule announces a regulatory definition for a statutory term and imposes no enforceable duty on the private sector.” The Court goes on to describe effluent limitations or other limitation as a restriction and frankly makes fun of EPA’s interpretation of trying to expand its jurisdiction. The Court describes EPA attempting to escape the limitations of the CWA and the fact that EPA could not “sweep broadly” using the language of the CWA.
Let’s analyze the word “any”
In fact, the Court engages in an analysis of the word “any.” EPA had attempted to use the word “any” to modify the term “other limitation.” Justice Sotomayor said that it was impossible to expand the word “any” to include the WOTUS definition in “other limitation.” The Court points out that Congress wrote the statute and neither EPA nor this Court is “…free to rewrite the statute to the Government’s liking.”
Many writers on WOTUS, including me, have argued that EPA was attempting to expand its jurisdiction in an unlawful way. This Supreme Court confirms that determination conclusively. The opinion continues to rip EPA and the Corps for attempting to develop language that pose no barrier to their reading of the CWA.
One sentence caught my attention, where the Court says “But the Government’s practical effects test is not grounded in the statutory text.” The Court was clearly saying EPA and the Corps action were out of control and many of you reacted by arguing this very point. Another solid conclusion by the Court is where it said “Beyond disregarding the statutory text, the Government’s construction [of CWA] also renders other statutory language superfluous.”
In further criticism of the EPA and the Corps, the Court says “Rather than confront that statutory text, the Government asks us to ignore it all together.”
This sentence says it all.
“The [Supreme] Court declines the Government’s invitation to override Congress’ considered choice by rewriting the words of the statute.”
After slamming EPA and the Corps, the Court decision simply says a U.S. federal district court is the proper place to review WOTUS, not a Court of Appeals. You would think EPA could have figured this out as well.
(This article first ran on February 15, 2018 in Farm Futures)
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Need “Consensus”? Try Pre-K for At-Risk Students

Posted on February 7, 2018 by matt ohern
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If Governor Ralph Northam is looking for a place to build legislative consensus, here’s one place to start: Support for pre-k programs aimed at better preparing at-risk four-year-olds for kindergarten and beyond.
True, conservatives remain skeptical about building massive universal government-run pre-k programs, as should liberals: In a “universal” program, once budgets get tight, the ones shunted aside are usually those who need help the most – low income children and parents.
And while some studies have shown that the impacts of pre-k programs fade or disappear over time, a recent study by Mathematica Policy Research of the KIPP charter school program concludes that “KIPP pre-K programs have a positive impact on students’ academic and cognitive skills that persist …”
This is buttressed by studies of the Virginia Preschool Initiative (VPI) consistently showing that children attending VPI are more likely to meet early literacy benchmarks, score higher on the third grade Standard of Learning tests, and more likely to be promoted on-time to eighth grade.
Created during the George Allen Administration more 23 years ago, the VPI program was intended to serve at-risk four-year-olds not served by Head Start or other public preschool programs. Under it, the state and localities share financial responsibility for giving these children a better start in life.
Today, VPI serves more than 17,000 children — but nearly 7,500 other children are left without access to a quality pre-k program. There are three primary reasons for this gap: Some localities are unable to meet the required match. Others have insufficient space. And, especially in rural areas, there are too few eligible students spread too thinly to make a program cost-effective.
More than 5,800 of these unserved children are in just 10 school divisions; another 400 children are in school divisions that do not participate in the program at all.
Policymakers are thus left trying to answer the question: “How do we reduce the number of unserved children in Virginia?”
Answering it includes figuring out how to lower barriers to participation. Northam and the General Assembly cannot rely on state and local funding alone. Localities either cannot or will not contribute and many simply don’t have enough facilities. And it’s unlikely that state funding will be found to cover both state and local shares.
The only solution – if we’re serious about increasing the number of students served – is greater involvement of quality private providers.
But few non-public providers are involved in the delivery of VPI because of barriers identified by the Virginia Child Care Association, among them: decisions by school systems to simply not include private providers; a high, expensive and arguably unnecessary requirement for licensed teachers; and a complex funding mechanism.
Fortunately, Delegate Steve Landes and Senator Bill Stanley have come up with at least a partial answer – and one endorsed by the Virginia School Readiness Committee, created by the General Assembly and Governor Terry McAuliffe in 2016. In response to the “urgent need” to increase access to early childhood education, the committee – composed of early childhood practitioners, policy experts and legislators — proposed expanding the Education Improvement Scholarship Tax Credit (EISTC) program to pre-k children.
Currently, the EISTC is available for K-12 students only. Donors to approved scholarship foundations receive a 65 percent state tax credit, and the foundations, in turn, provide scholarships to at-risk public school students seeking to attend a private school that better fits their needs. The revenue lost to the state is more than compensated by the savings from no longer paying for the child’s public education.
The Landes and Stanley legislation would ensure only quality pre-k programs were eligible to participate in the expanded EISTC by requiring a high quality curriculum, at least one teacher for every 10 students, at least a half-day program, and professional development of credentialed teachers in the classroom. Scholarships, in turn, would be capped by the amount the Commonwealth committed to spend had the child been able to attend a VPI program, so that the pre-k program would be as revenue neutral as the K-12 program.
The Stanley legislation was just unanimously approved by the Senate Finance Committee. The two bills differ largely in child eligibility: Landes’ bill matches the VPI income qualification; Stanley’s echoes the qualifications for the K-12 EISTC program. But both are means-tested to focus on at-risk children.
In the past, “conservatives” have generally been viewed as opposing pre-k expansion as too expensive; “liberals” have been viewed as opposing any programs outside of those tightly run by government entities. Those views are falling away as both pre-k effectiveness with low-income children and the limitations of government-exclusive programs become more evident.
The Landes and Stanley legislation offers consensus and compromise that would expand opportunities to at-risk children who do not receive these important services. It – and the children to be served – deserve support.
(A version of this column ran in the Richmond Times Dispatch on January 26, 2018)
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Expanding Access to Natural Gas is Smart Public Policy

Posted on February 7, 2018 by matt ohern
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The recent debate over the Atlantic Coast Pipeline and Mountain Valley Pipeline has highlighted the growing divide in Virginia over how to approach our Commonwealth’s energy needs. While reasonable people can debate the most prudent energy mix (natural gas vs. coal vs. oil vs. nuclear vs. renewables), there can be no debate that our energy needs are increasing. Our economy can only expand if the required energy resources are available to power new industry, homes, schools, hospitals, etc.
Despite all the emotional rhetoric from opponents of these infrastructure projects, natural gas is safer, cleaner, more abundant and more affordable than most alternatives. Natural gas emits 60 percent less carbon dioxide than coal and 30 percent less carbon dioxide than oil. We should harness American creativity and competitiveness to drive efficiency from all energy sources. By making use of all of the United States’ domestic energy sources, we can ensure the best environmental outcomes at the lowest costs.
Natural gas complements renewables like solar and wind and helps ensure that we have a diverse mix of energy resources. While solar and wind can produce varying amounts of energy, they cannot meet our energy needs alone. Natural gas is available on demand immediately and provides critical support to our renewable resources as it also helps us reach our nation’s clean energy goals. Today, natural gas generates 40% of our electricity and is an essential partner of solar, wind, hydro power, and even coal, for our long-term energy needs.
As for the two proposed projects here in Virginia, our domestic abundance of clean natural gas is delivered via the safest energy system in the nation according to the U.S. Pipeline and Hazardous Materials Safety Administration. Pipelines are the safest, most environmentally-friendly and most efficient and reliable mode of transportation for natural gas according to the U.S. Department of Transportation. In fact, a Washington State University nationwide field study in 2015 found that as little as 0.1 percent of the natural gas delivered nationwide is emitted from local distribution systems. Without new pipelines, our streets and highways could be overwhelmed by trucks trying to keep up with the nation’s demand for energy. And the carbon footprint from transporting fuel by pipeline is far less than moving energy by any other method of transportation.
Natural gas is safe, clean, reliable, affordable and abundant. While U.S. natural gas production is up 50% since 2005, total U.S. greenhouse gas emissions are down 11% as technological innovation continues to drive down natural gas emissions and costs. Natural gas serves nearly 66.7 million homes in America; 5.4 million businesses including restaurants, hospitals, schools, supermarkets, and hotels; 192,000 factories; and 1,900 electric power plants. On a daily basis, the average U.S. home uses 196 cubic feet of natural gas.
That’s why the Virginia Water Control Board recently approved the construction of the Mountain Valley Pipeline and granted conditional approval to the Atlantic Coast Pipeline pending additional information from the Virginia Department of Environmental Quality. That’s why pro-business Democrats like Governor Terry McAuliffe support these important infrastructure projects.
(This column first ran in the Roanoke Times on January 22, 2018)
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Transparency and Accountability for EDA's

Posted on February 7, 2018 by matt ohern
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How transparent and accountable should Economic Development Authorities be to the public?
That’s the fundamental issue raised by Sen. Amanda Chase, R-Chesterfield, who submitted a bill that would require local government approval for all EDA grants and budgets. That bill was defeated by one vote in the Senate’s local government committee, reports the Richmond Times-Dispatch, but Chase said she hopes to resurrect it in the near future.
“Bureaucrats who are not elected by the people should not be allowed to dole out taxpayer money,” said Chase. “I’m tired of elected officials abdicating their responsibility so bureaucrats can do their dirty work.”
The bill arises from a controversy in Chesterfield County over county plans to build an industrial megasite in the Bermuda district. The EDA wants to rezone and buy about 1,700 acres of land as a site for potential large, industrial users. The paucity of so-called megasites in Virginia has been identified as a bottleneck to economic development, ruling out the state for consideration by automobile companies, aerospace firms and other large-scale manufacturers. Success in attracting a major manufacturing concern could create $1 billion in investment and create up to 5,000 jobs.
Chesterfield economic developers contend that EDAs are accountable indirectly because authority members are appointed by boards of supervisors, and EDA expenditures of tax dollars are approved in counties’ budgetary process in open meetings. Additionally, all EDA expenditures are recorded by Chesterfield’s accounting department, and the EDA does an annual audit.
But members of a Chesterfield citizens group, the Bermuda Advocates for Responsible Development (BARD), say they have many unanswered questions about EDA expenditures and the proposed megasite.
EDAs have many powers, including the ability to acquire land and borrow money, said Patrick McSweeney, an attorney speaking on behalf of Chase’s bill. “This creates a shadow government potentially in every locality in Virginia. Once a decision is made by these authorities there is little that can be done about it unless they have done something blatantly illegal.”
“There’s no reason that local governments can’t do what they do,” he said. “There’s no reason not to have (EDAs) as an advisory body.”
Bacon’s bottom line: EDAs do spend millions of local dollars, they do issue tens of millions of dollars in municipal bonds, and their decisions do impact local communities. Virginians should insist upon total transparency in decision making regarding the assembly of land and building of infrastructure in industrial parks, and they should insist that elected officials be accountable for multimillion-dollar grants and expenditures. I don’t see how Chase’s bill does EDAs any harm, and I can’t understand why anyone would object to it.
(This article first ran in Bacon’s Rebellion on January 31 ,2018)
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